FINANCIAL STATEMENTS

A Message From the Chief Financial Officer

I am pleased to present the U.S. Equal Employment Opportunity Commission’s financial statements for fiscal year 2006. Our financial statements are an integral component of our Performance and Accountability Report. The Accountability of Tax Dollars Act of 2002 extends to the agency a requirement to prepare and submit audited financial statements. The President's Management Agenda, Improved Financial Performance component, among other standards, requires us to obtain and sustain clean
audit opinions on our financial statements. OMB issued Circular A-136, Financial Reporting Requirements, on July 24, 2006, which further consolidated and refined reporting requirements for the PAR submission. In addition, OMB Bulletin No. 06-03, Audit Requirements for Federal Financial Statements, on August 23, 2006, established updated minimum requirements for audits of Federal financial statements.

Our fiscal year 2006 financial statements received an unqualified opinion. This is the third consecutive year that the EEOC has received an unqualified opinion and represents another milestone in our efforts to improve the financial management of the agency. Two years ago our financial services provider, the Department of the Interior's National Business Center, notified us that the current version of our financial software was considered obsolete. We conducted a competitive acquisition
among Office of Management and Budget (OMB) approved shared service providers to establish a new servicing agreement. The Department of the Interior’s National Business Center won the competition with their proposal to upgrade the existing software to CGI’s Momentum® software package. The conversion and implementation will be completed on October 1, 2007, for FY 2008 operations. In addition, we plan to begin implementation of e-Travel software during FY 2008. An unstable GSA
vendor environment may continue to impact the implementation date for e-Travel.

In support of the Budget and Performance Integration component of the President's Management Agenda, we completed for the first time the Program Assessment Rating Tool (PART) assessment process working with the OMB. The results will be released in February 2007. Also, the agency undertook a review and update of the 6-year Strategic Plan covering FYs 2007 through 2012. The review included an update of the performance measures.

In support of the Competitive Sourcing component of the President’s Management Agenda, we have kicked off an A-76 study for the file disclosure function throughout the agency. This study will use the standard competition methodology. The competition is expected to be completed in October 2007.

For FY 2006, the agency received $327 million in budget authority. We completed the fiscal year within budget with improved financial management and some additional focus on cost controls and cost accounting. Compensation and benefit costs continue to consume about 70% of the budget. Some additional progress has been made to bring rising office space rent costs under control as we re-lease less office space consistent with the number of employees onboard. However, rent costs remain
about 9% of our total budget. With 10% of the budget dedicated to the State and local program, only 11% of the budget is available for technology, programs, travel, and other general expenses.

As reported in the past, I have identified several critical issues for the agency to focus on to continue to improve its long-term financial health. An update on each item is provided below.

Execute a disciplined analysis of future workforce and infrastructurerequirements. Unfortunately, the agency has been unable to slow the growth of the current and future cost of compensation and benefits for current employees, which makes up 70% of the EEOC's budget each year. These costs include salary, health and life insurance, agency contributions for retirement plans, social security, Medicare, worker's compensation, reasonable accommodations,
and transit subsidies. A plan to reposition the field structure for improved efficiency and customer service was implemented on January 1, 2006. In addition to the planned repositioning of headquarters, the Commission is faced with an important decision on office space for the headquarters building. Working with the General Services Administration on a market survey and solicitation for offers, we expect to present options and a recommendation to the Chair in January
2007. The proposal will involve a 10-year office lease and is expected to be the largest investment decision the agency will make in the next decade. The current lease is about 25% of the rent budget.

The agency contracted for a second independent top-down study of the information technology infrastructure and staffing, with a report finalized on September 12, 2006. The report calls for substantial changes in the governance, organization, use of contracts, server and network operations, desktop management, and the skill mix of staff in order to more effectively spend the $25 million annual budget for the information technology function.

Recognize and manage competing budget priorities. A limited hiring freeze has continued since August 2001. In addition, we have kept spending controls in place for discretionary travel, awards, and training. Nonpayroll costs also increased for homeland security, rent, facility services, and unfunded government-wide programs such as a uniform Federal Government employees’ identification card project.

Formulate a long-term performance budget strategy. The agency continues to develop a consistent approach to budget justifications due to a declining workload and the inventory of cases. An updated and simplified Strategic Plan that became effective on October 1, 2006, should help focus how the agency will support future requests for budget resources.